Published: 05 February 2014

RBZ acting Governor Dr Dhliwayo said the growth in non-performing loans within insider loans was a worrisome development.

As of December 31, 2013, she said the level of total insider loans in the banking system was $175,3 million (including Interfin).

"Of these insider loans $117,4 million (66,97 percent) was non-performing. The growth in non-performing loans within insider loans is a worrisome  development.

"Previously, the Reserve Bank would net out insider loans from banks' capital. This measures, however, was not effective in deterring banks from extending insider loans," she said.

On the back of such negative development, Dr Dhliwayo said with immediate effect among others, no bank shall grant loans to insiders and related interests (as defined in the Banking Regulations, Statutory Instrument 205 of 2000) except where such credit is granted as part of the employees' conditions of service and is available to other employees."

She added that individuals and companies may, however, access loans from other banking institutions where they are not classified as insiders or related parties.

Banks boards are now required to review the existing levels of insider loans, ensure adequate provisioning and report insider loans to the central bank.

Any violation of the measures announced by the RBZ will attract a penalty in terms of the relevant provisions of the Banking Act.
- chronicle

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